The Moody’s agency cut Ireland’s credit rating Monday, citing the country’s swelling national debt, the unpredictable cost of its bank-bailout plans and its weak growth prospects for the next three to five years.
Shares on the Irish Stock Exchange slumped after Dietmar Hornung, Moody’s lead analyst for Ireland, announced that the New York-based agency was dropping its credit-worthiness rating one notch to Aa2. Moody’s previously cut Ireland’s rating to Aa1 from the top grade, Aaa, in July 2009 as Ireland plunged into its worst recession since the Great Depression of the 1930s.But but but but austerity fixes everything! Ireland's reducing its debt! Irish workers tightened their belts and the Irish government did along with them and cut spending!
And since nobody's buying anything, Ireland is now crashing into a deflationary spiral. That'll be us pretty damn soon if this path continues. Ireland has done exactly what the deficit hawks want us to do, and as a result their economy is imploding.
But Very Serious People want us to cut the deficit in the middle of a recession.
@Zandar:
ReplyDeleteYe Gods, I'm long-winded today. I was about to drop another telephone book on your comments section. Edited twice for not-my-blog:
Contra Kroog and DeLong, either of whom can crush my puny brain with his awesome smartitude, I've bet deflation has been inevitable since the credit markets froze. You don't blow forty years of overpricing and overleverage into your entire economy, to hide from yourselves that China, India, and the EU are quietly drinking your milkshake, subject the economy to so fundamental and crippling a shock, and then escape deflation.
Yeah, actually, that's pretty much our problem.
ReplyDeleteSince people were using their homes as ATMs, that all went straight to hell and ever since nobody can get anything going. People aren't buying stuff.
No demand, all supply, prices crash. Like I said, when that happens across an entire economy, it's deflation.
Well, yeah, but the point I didn't make in my previous comment *facepalm* is that the conversations that discuss or at least tolerate lefty economic thinking seem to lean on the notion that if we had fully backstopped the demand gap and state budgets with stimulus, we wouldn't face the deflationary cycle we're slogging into, or at least it would only be a kitten sized version. That's what I have a hard time buying... the primary difference I see between 1929 and 2007 is that this time, the guys at the helm did something that actually helped tournequette the crisis. Valuations on everything were bound for the basement, whether or not real unemployment was 10% or 20% or 30%. Granted, I'm extremely glad we did it, yay millions upon millions of lives not ruined, wish we'd gone further. I just don't see any actions, no matter how agressive, that would convince the markets that housing, commodities, equities, and everything else was worth a low-pain fraction of what it was in the early 00's. LOL, why can't we ever convince them on any of our bullshit? They're more than happy to gobble their own.
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